Even before Walmart’s supplier sustainability index was announced, interest in green procurement (GP) practices had been growing. The trade publication Supply Chain Management Review had a piece on it earlier this month. IBM recently published an article on the subject as well.
But what seems to be missing from the current discussions is how implementing GP standards could create significant disruptions in a company’s supply chain.
Consider this scenario: A company implements GP standards and negotiates supply agreements with “green suppliers”. The number of “green suppliers” for a particular process input is likely to be small, so the company is forced to reduce its supplier base, possibly to a single supplier.
Supply chain professionals know this conundrum too well – by consolidating purchases, you increase purchasing and negotiation power, but you lose flexibility in addressing supply disruptions should there be problems. GP programs may also result in purchasing consolidation and reduce a company’s ability to manage that supplier’s inability to deliver (for whatever reason).
GP programs should not be viewed as anything less than a significant business change. Underestimating the business risk posed by implementing GP standards may have dramatic consequences.